Reinsurance News

Fortitude Re sale incrementally positive for AIG, AM Best says

28th November 2019 - Author: Staff Writer

Global insurer AIG’s Long-Term Issuer Credit Rating of “bbb”, as well as the Financial Strength Ratings and the Long-Term ICRs of its operating subsidiaries, remain unchanged by AM Best following the decision to offload Fortitude Re in a transaction the ratings agency describes as incrementally positive for the group.

AIG LogoAIG officially launched the legacy and run-off reinsurer in collaboration with global alternative asset manager The Carlyle Group in late 2018.

It was confirmed recently that The Carlyle Group and T&D Holdings have partnered to acquire a 76.6% ownership interest in a deal valued at $1.8 billion.

AIG expects to use the majority of the proceeds to contribute capital to its insurance company subsidiaries upon closing, which is expected to take place in mid-2020.

Fortitude Re held roughly $31 billion and legacy life and retirement reserves, and an additional $4 billion in general insurance/property/casualty reserves.

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The reserve blocks overall were largely non-core legacy products that tended to be longer-duration higher risk products based on AM Best’s product continuum.

AM Best believes the removal of these legacy reserves will improve the holding company’s risk-adjusted capital incrementally and leave it with a more focused reserve profile while still maintaining significant diversification between its existing companies.

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